IZWE SAVINGS AND LOANS: A RELIABLE SOURCE OF FINANCE FOR MSMEs
The Savings and Loans industry in Ghana has been instrumental in the country’s economic growth and expansion. The industry is beneficial to micro, small, and medium-sized enterprises (MSMEs) that encounter challenges in obtaining credit from the country’s largest financial institutions. Over the past few decades, saving and loans institutions have bridged the gap between traditional banking services and the unbanked population, particularly those in the informal sector.
The industry has introduced numerous economically active individuals to financial services for the first time, allowing them to access savings and current accounts, as well as loans.
Despite facing challenges, including the recent banking sector crisis, a critical mass of Savings and Loans companies has remained resilient. They continue to serve as a cornerstone of financial services, ensuring that financial inclusion is not just a goal but a reality for many Ghanaians.
One notable brand that has distinguished itself in the Savings and Loans industry is the Izwe Savings and Loans Ltd. A leader in the Savings and Loans industry, Izwe has distinguished itself as a formidable force to reckon with. Over the past decade, the institution has made significant strides, playing a crucial role in driving financial inclusion and supporting the growth of the Micro, Small, and Medium Enterprises (MSME) sector.
Izwe’s Journey, Key Milestones and Successes
Izwe Savings and Loans Ltd. began its operations in Ghana as a Finance House in 2011. In the first six years, the company focused on providing loans to government workers and offering fixed-term investments to individuals and corporates.
During this period, Izwe made history as the first non-bank financial institution to issue a corporate bond on the Ghana Stock Exchange in 2013. The company’s future growth and expansion were established by this milestone.
Izwe has achieved several important milestones as a player in the Savings and Loans industry. The company improved its service offerings in 2015 by setting up a call center, which enhanced customer service and support. In 2016, Izwe was honored with the Finance House of the Year Award by the Chartered Institute of Marketing Ghana (CIMG), demonstrating its industry excellence.
In addition, between 2019 and 2022, Izwe’s ongoing achievements were acknowledged when the company was included in the Ghana Club 100 for its 17th, 18th and 19th editions. This esteemed recognition showcases the company’s steady performance and its status as a frontrunner in the financial industry of Ghana.
“In 2020, we obtained our license to become a Savings & Loans company, expanding our products and services to include Savings and Current accounts, SME loans and now digital accounts”.
Izwe currently has 12 branches and 35 outlets, with over 500 sales agents spread across Ghana. This wide coverage has allowed the company to cater to diverse range of customers, offering crucial financial services to those who previously had limited access. So far, Izwe has provided financial assistance to over 300,000 Ghanaians, making a substantial impact on the country’s financial inclusion efforts.
Strategic Approach to Filling the SME Credit Gap
Ghana’s economy relies heavily on small and medium-sized enterprises, which often struggle to secure adequate credit from traditional banks. Izwe and other Savings and Loans Institutions have played a vital role in tackling this challenge.
Izwe has been at the forefront of providing tailored financial products that meet the unique needs of MSMEs. The company offers a range of customized loan products with flexible repayment terms, aligning with the cash flow cycles of these businesses. This approach has made credit more accessible to MSMEs, helping them to grow and thrive.
Izwe also performs Credit Assessment and Risk Management to tackle the MSME Credit gap. To more accurately evaluate the creditworthiness of the MSMEs, Izwe has made investments in advanced credit assessments tools. This enables the company to precisely assess the potential of small businesses and handle the risk linked to this sector.
Furthermore, Izwe’s focus is on using technology to simplify the loan application and approval processes with the goal of increasing access to credit by minimizing the time and effort needed for customers. “This integration of technology improves the overall effectiveness of our lending services, offering customers a quicker and more user-friendly experience.”
Izwe to date has provided “loans to help 59,256 people to further their education, over 41,000 individuals to complete or improve their homes, SME loans to approximately 7,508 entities, and savings accounts to more than 40,000 individuals”.
Challenges Confronting Access to Finance for MSMEs
Access to finance is indeed a significant challenge for Micro, Small, and Medium Enterprises (MSMEs) in Ghana, often hindering their growth and development. As key drivers of the economy, MSMEs require tailored financial solutions to overcome the numerous barriers they face in securing funding.
Meanwhile, several factors contribute to the difficulties MSMEs face in accessing finance. One of the primary challenges for MSMEs is the inability to provide adequate collateral, a requirement for traditional loans. Many small businesses lack the necessary assets to secure loans, making it difficult for them to access credit.
Moreover, another barrier is the high interest rates. The perceived high risk associated with lending to MSMEs often results in higher interest rates. These rates can be prohibitive for small businesses, limiting their ability to borrow and invest in growth.
Again, Complex Loan Processes also present a barrier to MSMEs. The application and approval processes for loans can be complex and time-consuming. This discourages many small businesses from applying, as they may lack the resources or expertise to navigate these processes.
In addition, limited financial records is also a factor inhibiting access to finance for MSMEs. Many MSMEs, particularly micro and small businesses, often lack comprehensive financial records. This makes it challenging for lenders to assess their creditworthiness, further limiting their access to finance.
“Instability of business models or no track record [is another factor]. Many MSMEs change their business models depending on market situation or what they believe is selling at a point in time. Financial institutions are uncomfortable with this because any knowledge or assessment done on a particular industry to advance financial support is rendered useless when the client switches to another industry.”
Addressing the Financing Gap Among MSMEs
Izwe Savings and Loans Ltd. has implemented several strategies to mitigate the financing gaps experienced by MSMEs, by offering innovative products and services that cater to the unique needs of MSMEs, making finance more accessible to MSMEs and supporting their growth.
One of such strategies is the Flexible Collateral Requirements. Understanding the challenges MSMEs face in providing traditional collateral, Izwe “offers loan products with flexible collateral requirements”. The company often considers alternative forms of collateral, such as business cash flow or the business owner’s credit history. In some cases, Izwe even offers unsecured loans, broadening access to finance for MSMEs.
The company also provides competitive interest rates. “Izwe strives to offer very competitive interest rates tailored for MSMEs.” Izwe recognizes the financial strain high interest rates can impose on small businesses and as such provides more competitive lending options.
In other to make applications easier for MSMEs, Izwe provides Simplified Application Processes. “We streamline and simplify the loan application processes to address the complexities of loan applications.” Izwe has also introduced digital platforms’ that enables for fast and easier applications and approvals, reducing the burden on MSMEs.
Furthermore, beyond providing financial products, Izwe is committed to building the financial capacity of MSMEs. The company offers financial literacy training and support, helping business owners better manage their finances and make informed decisions.
In addition, Risk Management Solutions is another means by which Izwe uses to reduce the barriers MSMEs face. To mitigate the risks associated with lending to MSMEs, Izwe has invested in advanced credit assessment tools. Above all, Izwe offers insurance-linked loan products that provide further security for both parties.
Strides Made to Improve Access to Credit
Over the past eight years, Izwe Savings and Loans Ltd. has made significant strides in improving access to credit for MSMEs.
“When we started lending to SMEs, we only accepted vehicles as collateral (Car4Cash). We have evolved into accepting Cash or Money Market instruments, landed property and even introduced products like Invoice Discounting and the Temporary Overdraft, which do not require the provision of collateral.”
These innovative products introduced by the company provide more flexible financing options for the MSME sector.
Future Strategies to Enhancing Financial Inclusion
As Izwe Savings and Loans Ltd. looks to the future, the company is committed to further expand access to finance for the SME sector. New strategies include the introduction of products like:
POS– Point of Sale Device: This product enables businesses to manage transactions more effectively, improving their cash flow and creditworthiness.
Merchant Credit: Through the Izwe POS, SME users can access loans, providing them with the financial support needed to grow their businesses.
NSS Extra: This short-term loan product is designed specifically for National Service personnel, offering them quick and easy access to funds through a digital platform.
Tailored Products for MSMEs
Izwe Savings and Loans Ltd. offers a range of products tailored to meet the diverse needs of MSMEs across different segments. Some of them are:
Micro Enterprises: Products like iSave, iVest, Savings Plan, and MobiSave cater to the needs of micro-enterprises, providing accessible savings and investment options.
Small Enterprises: In addition to the products available to micro-enterprises, small businesses can leverage products such as iFlex (current account), Temporary Overdraft, Invoice Discounting, Car4Cash, and landed property loans.
Medium Enterprises: Medium enterprises have access to the full suite of Izwe’s products, including cashback loans, which provide quick and flexible financing solutions.
Transforming the Financial Services Industry for MSMEs Via Technology and Innovation
One critical success factor in today’s ever changing corporate environment, especially in the financial services sector, is the use of technology. Izwe Savings and Loans Ltd. recognizes this shift and has strategically expanded its digital offerings to enhance its operations, product development, and service delivery.
Izwe Savings and Loans Ltd. has integrated technology into its operations to improve efficiency, transparency, and customer satisfaction. Key initiatives include Mobile App for Field Collection Agents.
“Our Field Collection Agents use a Mobile App which allows them to credit customer accounts with funds collected instantly. The Customer receives an SMS confirming transactions instantly. This improves trust.”
To further simplify loan applications, Izwe has introduced Loan Application Processing via Mobile App. This enables Field Loan Agents to use a mobile app to collect and process loan applications on the field. This reduces the turnaround time for loan approvals, making it easier and faster for MSMEs to access the much-needed funds.
Introducing New Digital Innovations in the Savings and Loans Industry
Izwe has been at the forefront of introducing digital innovations that redefine how savings and loans services are delivered. Some of the notable innovations include the MobiSave Account.
“The MobiSave product has demystified banking and given the underserved full access to banking services with great convenience.”
Customers who previously had limited access to banking services can now save, invest, and manage their finances with ease. This innovation makes banking accessible to everyone, including those in underserved communities.
Another innovative product the company has introduced is the USSD Services. Through USSD codes, “customers can deposit and withdraw money from their accounts, apply for loans, repay loans, transfer funds, and check their account balances, all from their mobile phones”. This service enhances convenience and accessibility, particularly for those without smartphones or internet access.
Izwe Savings and Loans Ltd. Introduces New Identity
In 2024, Izwe Savings and Loans Ltd. launched a refreshed and reimagined identity and purpose to better serve its customer base and solidify its market position. After 13 years of successful operation in Ghana, Izwe undertook a comprehensive internal and external assessment of its brand.
“This evaluation highlighted the need for a strategic repositioning to effectively cater for a broader target market which includes the Micro, Small, and Medium Enterprises (MSMEs) and also align with the company’s new purpose which is to inspire progress.”
The purpose for the brand refresh is to enhance its ability to meet the evolving needs of its customers and “further solidify our position in the market”.
The new brand colors symbolize this transformation:
Sky Blue: Signifies trust and credibility, reinforcing Izwe’s commitment to reliable financial services.
Charcoal: Represents stability and professionalism, key attributes that customers can expect from Izwe.
White: Emphasizes honesty and simplicity, reflecting the transparent and straightforward approach Izwe takes in its operations.
Izwe’s Outstanding Factors
In a competitive Savings and Loans market, Izwe distinguishes itself through several key factors. Some of the factors include:
Loan Ticket Sizes: Izwe offers SME loans up to GHS 2 million for qualified customers, providing significant financial support for business growth.
Turnaround Time (TAT): Izwe prides itself on the speedy delivery of its services, ensuring that customers receive timely financial assistance.
Digitalization: Izwe continues to push the boundaries of digital financial solutions, offering cutting-edge products that enhance customer convenience and accessibility.
Beyond Savings and Loans, Izwe Savings and Loans Ltd. has diversified its offerings to include Insurance and Financial Literacy.
“Izwe provides Motor and Property Insurance to our clients with the help of partner insurance companies. Our aim is to help our clients protect their lives and property from unforeseen contingencies. We have plans to introduce a Funeral insurance product soon.”
Also, Izwe actively undertakes Financial Literacy education for its clients. It provides “training and education on a range of finance related topics to help our customers do business better. By this, we ensure that our customers grow and thrive with us.”
Advice for MSMEs Seeking Access to Finance
For MSMEs looking to expand their businesses, access to finance is crucial. Izwe, thus, advises MSMEs to develop a compelling Business Plan to ease their access to finance. “A well-structured business plan is essential. It should clearly outline the business model, market analysis, investment plans, and financial projections.”
Formalization is another advice Izwe offers prospective MSMEs. Izwe is tasking MSMEs to strive to structure and organize their businesses properly. As such, this enhances accountability and compliance with regulatory frameworks, boosting credibility in the eyes of lenders.
The company also implores MSMEs to network with trade associations. Izwe believes that, building a strong credit history is very essential for MSMEs. Maintaining a good credit score is vital. “MSMEs should manage debts responsibly, paying them on time to avoid defaults.”
Izwe further advises MSMEs to form strategic partnerships and seek financial education and training. Moreover, collaborating with other businesses, financial institutions, and development organizations “can provide the support needed for growth”.
Izwe Savings and Loans Ltd. has not only built a position for itself in Ghana’s financial industry, but it has also had a substantial impact on the overall economy. By tackling the MSME credit gap and promoting financial inclusion, Izwe has established itself as an economic growth driver.